Inner city property markets engulfed with panic sales

The collapse in immigration, ballooning rental vacancy rates, falling rents, and falling dwelling values is reportedly forcing inner-city property investors to cut their losses and sell:

Inner Sydney has become a fertile hunting ground for bargain hunters as panicked investors try to offload apartments at lower prices in the hope of speeding through sales.

Apartments in the CBD and surrounds have recently been listed at more than $250,000 below the prices they were listed at before the pandemic hit, with some listed as “must be sold” or “urgent sale”.

The deals have come as sales data revealed unit prices in the region dropped by an average of 8 per cent over the past three months…

The weaker inner city unit market was largely the result of landlords struggling with long-term rental vacancies.

Many relied on international students, travellers and hospitality workers to tenant their properties but they were no longer getting rents because of travel restrictions, job cuts and younger renters moving back in with parents.

My Housing Market economist Andrew Wilson said the falling rents would encourage more investor owners to sell units but, with fewer other investors in the market to buy them, many would struggle to attract buyers.

This would force investor to make further price cuts. “The inner city unit market is Sydney’s weakest and will probably remain so until international travel restrictions are lifted,” Mr Wilson said…

Tom Haylock, 32, and Julia Buckland, 29, recently bought a Warriewood home for about $300,000 below the pre-Covid price…

They later found out the investor owner had sold the property alongside multiple other homes. “We got the feeling it was a panic sale because of Covid,” Mr Haylock said.

The situation is likely even worse in Melbourne, whose economy has been hit harder by COVID-19 and is even more reliant on immigration to fill demand:

Perversely, the latest dwelling approvals data for Melbourne shows that its dwelling supply pipeline remains strong, suggesting the oversupply (and rental vacancies) will only grow from here:

This points to further falls in both dwelling prices and rents – a nasty pincer for negatively geared investors already struggling financially.

Thus, expect more forced sales as emergency income support and mortgage repayment holidays end, in turn placing further downward pressure on property prices.

Leith van Onselen

Comments

  1. RobotSenseiMEMBER

    But when you use the term “oversupply” are we talking from an investor perspective, or someone trying to buy a place perspective? Because I’m sure there’s a bazillion people out there still looking to buy just not at the ridiculous prices some are accustomed to.

  2. Martin North’s data looks ominous for the highly geared – be it landlord or owner. And the rental stress is going nuts

  3. anecdata – 4 days ago, while on our daily walk, we saw For Sale sticker on a 2014 Van and I commented that these guys might be struggling to pay bills. On Monday I passed same house and saw the For Sale sticker removed but then I noticed For Sale sticker on the 2 year old Jeep. My guess is they couldn’t get enough from the older van to pay what they owe.

    Volumes still very low in my area – only 1 new For Sale board on my walking patch.

    • Where are you located Niko? I’m seeing little evidence of mortgage stress in my part of Brisbane aside from a growing number of rentals but, rental vacancy rates are still lower than they were in 2009 in the GFC aftermath. Nevertheless with a good amount of construction around the place and tanking immigration, plus the flow on effects of the COVID recession yet to be felt I can see trouble being inevitable.

      • Southwest Sydney – Middleton Grange – new area full of drug dealers and kardashians wives. Rest of the residents (most of the rest) are tradies with kardashians wives.

          • 100%. Lost count how many properties are 3/4 finished by people moving in they can’t afford to pay rent elsewhere. Also, lot of houses never get completed (mainly build by the owner) and people living inside for few years now – most unfinished fences and yards and when waling at night we can see so many houses empty of furniture with only plastic dinner tables and chairs. Scary.

        • if rates fall down to Melbourne levels – $50 anything goes, I’ll be going for very long walks.

        • Mate I’m at Glenfield not much happening here, I found people moving back and kicking out their tenants.
          I’d say all the action is happening Inner West, for now

          • if it’s not for JK and JS my gut feel is over 50% of Middleton Grange will be up for sale. JK and JS make these people hold on to a hope that things will turn around. Also, I think majority have asked banks to park their loan repayments on the side for six months.
            My bet is banks are now going through their loans and will start nudging most risky loans into selling by telling them banks will not approve another 6 months holiday. From the misery I observe I’d thought lot more properties would have been up for sale.
            But then again I have to stress that I don’t check online listings for the area as I am not interested to live here and I know that some properties are for sale without any For Sale boards.

            Time will tell.

  4. These falls certainly aren’t reflected in the Corelogic Sydney index which has basically flatlined lately, and is even looking like it might start heading up.

    Whether the Corelogic data is credible is another matter.

  5. I haven’t been able to bring myself to watch a Martin North horror film for a while now. Just glad that I have a small mortgage and no investment properties.

    • I just finished his latest household one. It’s a doozy (though I stopped when he started getting into the Q&A post code analysis)

  6. Prices are stable where I am at South West Rocks ( Arakoon ) NSW . New listings with a mid range price dont last long. Market seems stronger than pre Covid.

    • The “market” is on life support along with the entire economy thanks to DoleHider v1 and v2. When those are reduced / withdrawn we will really see impact on the market.

      Australia is the master of kicking the can … anything to delay the inevitable on the off chance something … anything … comes along to save it.

  7. alwaysanonMEMBER

    In am convinced that Units are going to be where the ‘deals’ and oversupply are – but I keep seeing 10-15 year old apartments all of the sudden have cracking/structural issues not to mention the flammable cladding etc. The building standards are just so questionable there I couldn’t bring myself to buy one even at a substantial discount and went for the 120 year old terrace instead.